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#2263859 - 12/21/21 03:53 PM Re: P2P Pmts BrianC
InFairness, CRCM Offline
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Originally Posted by BrianC
There was a discussion in the private forums a few months ago where a CFPB lawyer was discussing 1005.14 and the CFPB lawyer made the comment that if a bank has a contract to issue Mastercard or Visa cards and a P2P provider has a contract to accept Mastercard or Visa cards, then the Bank has a contract with the P2P with the P2P provider for the purposes of 1005.14. I completely disagree with that interpretation, but thta FAQ essentially puts us on notice that if there is a debit card transaction from a third party provider, we're on the hook for investigating it even if it was the third party provider's access device that was compromised.

The "narrow" exception the CFPB references would be if I authorized a debit from my account to the P2P provider and then held the funds in a moble wallet and the unauthorize charge impacted the funds in the mobile wallet.

Brian, this is what I read the new FAQs as saying as well.
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#2268878 - 04/11/22 12:06 PM Re: P2P Pmts Andy_Z
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So is it correct based on these FAQs that if a customer claims someone used their Paypal credentials to send a payment the bank would be required to investigate? Also does this also cover Target debit card transactions?
Last edited by terpsfan; 04/11/22 12:07 PM.
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#2268882 - 04/11/22 01:06 PM Re: P2P Pmts Andy_Z
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Think of the phone as the debit card. I get your debit card and use it, it's unauthorized. I get your phone and use it, it's unauthorized. Yes the bank has to review it.

I don't know the ins and outs of a Target card. Is there an agreement, even loosely between the bank and Target? I'd want to review the agreement with the consumer, but under the philosophy that Target and the bank both accept V/MC, that can be an agreement. I'd also want to see if Target fits the definition of a FI.
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#2268896 - 04/11/22 03:38 PM Re: P2P Pmts Andy_Z
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So even though the credentials that were used were not issued by us it would be a error under Reg E for us to investigate?

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#2268902 - 04/11/22 05:01 PM Re: P2P Pmts Andy_Z
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2005.14 has the tests and it is important to consider the CFPB's purpose - protect consumers. IMHO the CFPB took the easy road and said give it (responsibility) to the banks. They looked at 2005.14 and said "an agreement with a common credit card constitutes an agreement for .14" so if you do not have a clear exception, the claim will fall to you. Many state AGs have complained about the poor customer service from P2Ps to the CFPB and I just feel they saw a short cut here. I still do not understand how each entity following credit card rules pertains to these transfers unless those credit card rules could lay the liability one way or the other. And they cannot supersede Reg E. The P2P should shoulder the liability when it goes thru the P2Ps systems and they have the trail and the info. But that wasn't what came from the FAQs.

It is important to note that a Compliance Guide does not have the force of law. The FAQs are a Compliance Guide. However, if the bank is faulted for claims handling and there is any question, the CFPB will opine, and they have already, so it's not the law, it didn't go thru an ANPR process, but it might as well be the law. If this is to be changed it'll have to come from Congress or a new CFPB administration.

At the end of the day, the consumer must be protected. Banks are easier to manage than P2Ps. I believe that is Reg E Claims Math.
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#2268904 - 04/11/22 05:46 PM Re: P2P Pmts Andy_Z
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The Target does is not a V/MC branded card. Target issues a "decoupled debit card" to allow shoppers to use the card exclusively at Target. Instead of routing the transactions through a debit card network, the customer provides Target their routing number and checking account number and Target routes the transactions through NACHA, thus saving Target on the interchange fees. The risk to target is that unlike V/MC transactions, ACH transactions can be returned NSF.

Similar to V/MC, the CFPB is going to argue that since both Target and the bank have agreements with NACHA for ACH transactions, the bank will have an obligation to investigate a claim. What the CFPB doesn't understand is that if the Bank returns Target Card transactions as unauthorized due to the card being stolen, the Bank will also place a block on future Target ACH debits so that when the customer gets their new Target Card, the Bank will return the legitimate transactions as well because the Bank won't be able to tell the difference between the fraudulent ACH debits and the legitimate ACH debits.
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#2268909 - 04/11/22 06:14 PM Re: P2P Pmts Andy_Z
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I'm multitasking as I write this, but I do recall the FAQs indicated that an ACH agreement alone (with a P2P) wasn't sufficient to eliminate the 1005.14 (and I've no idea why I used 2005 above other than it's Monday) exception. But because a P2P and a bank each had V/MC agreements that did qualify for the exception. I would maintain that Target also accepts V/MC (I assume - I don't shop there) and the FAQs were not concerned that V/MC was involved in the transaction in question. It never said nor insinuated that was a condition. The fact that each had an agreement with V/MC was sufficient.

I'm already hearing bankers comment about the increase in claims. Are y'all seeing that yet?
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#2268919 - 04/11/22 07:40 PM Re: P2P Pmts Andy_Z
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This is the quote from the FAQs that Andy references.

In narrow circumstances, a financial institution can also be considered a “service provider” under Regulation E. A financial institution who provides EFT services to a consumer but does not hold the consumer’s account is a service provider under Regulation E if the financial institution: (1) issues an access device that the consumer can use to access the account and (2) no agreement exists between the access device-issuing financial institution and the account-holding financial institution. 12 CFR 1005.14(a). The automated clearing house (ACH) rules alone do not generally constitute an agreement for purposes of whether a financial institution meets the definition of “service provider” under Regulation E. However, an ACH agreement combined with another agreement to process payment transfers – such as an ACH agreement under which members specifically agree to honor each other's debit cards – is an “agreement,” and thus section 1005.14 does not apply. Comment 14(a)-2.
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